Kremlin dismisses top economist over blunt warning on Russia's economic decline

A senior Russian state economist has been removed

A senior Russian state economist has been removed from his post after openly cautioning that Moscow is losing a prolonged economic standoff with the West and could eventually face domestic instability, just as the European Union gears up for a significant new round of sanctions targeting Russia's defense sector.

The dismissal of Andrei Klepach, the chief economist at the state development bank VEB.RF, goes beyond a routine reshuffle within the Kremlin. For Washington and its European partners, the key question is whether years of economic pressure are finally straining Moscow's capacity to continue the conflict, or if Russia can keep absorbing the costs while rebuilding its war reserves. Two sources familiar with the situation confirmed Klepach's exit on August 17, following remarks where he described Russia as falling behind in technology and economics while facing increasing war-related expenses.

VEB confirmed Klepach's departure but declined to specify a reason. Klepach, who held the role since 2014 after a decade at the Economy Ministry, also acknowledged his firing. In a May address to the Nikitsky Club—a gathering of economists, scholars, and officials—he warned, "We are falling behind. We are losing both the technological and economic competition in the world." The speech only drew media attention last week. He added that Russia was losing to China, the United States, and even Ukraine, whose resilience he credited to Western support. "We will not win the competition in this war of attrition," Klepach stated. "We have the illusion that everything there will collapse. It has not collapsed and will not collapse. Our costs are mounting."

Despite acknowledging Russia's resistance to Western san…

Despite acknowledging Russia's resistance to Western sanctions, Klepach pointed to Ukrainian strikes on energy and logistics infrastructure as a growing burden. Russia's central bank projected in July that economic growth could dip to zero this year, while repeated attacks on refineries have disrupted supply chains and fueled inflation. He predicted a social crisis could emerge "precisely when nobody is particularly expecting it," though he conceded that an immediate economic collapse was unlikely.

A European intelligence source told Fox News Digital that Russia's structural economic woes should not be mistaken for immediate fiscal strain on President Vladimir Putin. Higher oil prices have helped Moscow cover more of its budget deficit, potentially buying the Kremlin time before economic pressures force difficult military decisions. "It doesn't solve the fundamental economic problems in Russia, but from a budgetary point of view, Putin is OK actually," the source said. "He's not under pressure." This assessment tempers Klepach's warning, suggesting Russia may be losing ground over the long term while still having enough near-term revenue to prolong the fight.

Meanwhile, the EU is preparing to escalate measures. EU foreign policy chief Kaja Kallas told Germany's Die Welt she plans to propose what she called the "most far-reaching sanctions listings since the start of the war," claiming existing measures have already deprived Russia's military of over $1.16 trillion. Diplomatic sources indicated the bloc's service is expected to target around 1,600 additional Russian individuals and entities, focusing on the military-industrial complex. The proposed measures would include asset freezes and travel bans, with the list set for presentation to EU governments in early September and adoption targeted for October.

Inside Russia, authorities moved against Lev Shlosberg, …

Inside Russia, authorities moved against Lev Shlosberg, deputy chairman of the Yabloko party, sentencing him to 11 years in a penal colony on charges of discrediting the armed forces and spreading false information. Shlosberg, who called the war a catastrophe, denied the charges and reiterated his call for a ceasefire. The sentencing came a week after Russia's Supreme Court barred Yabloko from next month's parliamentary election.

Over the weekend, attacks continued. Russian strikes hit port infrastructure in Ukraine's Izmail district, damaging a civilian Togo-flagged vessel and injuring four people. A Ukrainian drone attack killed a woman and struck an industrial site in Russia's Astrakhan region. ArcelorMittal reported a Russian missile strike on its Kryvyi Rih steel plant killed two employees and injured five others, damaging key facilities and halting part of production. Reuters contributed to this report.